I believe this colorful Sept 17th mortgage market update sums up what we have all been screaming would happen it .gov was forced to run the game. This story has been posted in its entirety for your reading enjoyment…or not if you are in the mortgage or real estate business, or are a home owner/buyer in need of financing. -Best Mr Mortgage
By Rob Chrisman – Director of Capital Markets, RPM Mortgage, Alamo, CA
“I was lying awake the other night, worrying about all of the debt on my credit card. The jet ski, mink socks, the ATV, my new plasma TV, ruby encrusted dog food bowl, surround-sound stereo – they are great, but darn they cost a lot. And then it dawned on me: it wasn’t my fault! It was the credit card company’s fault! All of those radio ads that claim to help people “Get back at those credit cards companies” must be telling the truth. Seriously, yes, the credit card companies are guilty of making it easy to purchase goods, including necessities, and charging some pretty hefty rates, but they add liquidity to the economy. Really, who is responsible for spending beyond their means in the first place? Despite the radio ads, it is not the credit card companies, or the retail vendors…
Who is AIG (American International Group), and why should you care about them? AIG is a worldwide conglomerate made up of hundreds of businesses all over the world, although many of AIG’s subsidiaries wrote insurance of various types. They are believed to be the world’s largest insurer in spite of not being a household name here in the US. Interestingly, the plan was to have business cycles in some businesses offset cycles in others, giving AIG a steady stream of revenue. Smart. Lately, as we all know, AIG is bogged down in the mortgage crisis, since a) they insured many intra-bank and loans and mortgage securities, along with insuring complex mortgage debt derivatives, and b) some of its insurance companies own large mortgage-backed securities holdings. The Fed believes that the complexity of AIG ‘s business, and the fact that it does business with thousands of companies around the globe, make its survival critical. The US government, thereby the taxpayer, loaned them $85 billion for two years and now owns 79.9% of AIG! (Along with 100% of Fannie and 100% of Freddie.) Taxpayers are all hoping for a rally in AIG’s stock!
Were your locks up last week? Join the crowd. As pipelines move among lenders (which may eventually catch up with them!) the MBA Mortgage Applications Index showed a 33% increase over two weeks ago. Refi’s almost doubled, up 88%. (Purchase applications were up 2.4%.) Housing Permits, which were announced today, dropped to a 26-year low. Starts of new homes fell 6.2% to the lowest in 17 years, and much weaker than expected.
Lehman is peeling off parts of their business. For example, Barclay’s reportedly purchased their investment bank and trading operation. Oil is up $3 per barrel, and the Fed left overnight rates unchanged. How is the market reacting to all of this? Treasury rates are down more (the 10-yr is down to 3.36%!) but 30-yr fixed rate mortgage prices are worse by about .250. As one dealer put it, “A flight to quality right now means U.S. Treasuries, not mortgage-backed securities.”
As I careen towards retirement, I saw a story that the Senate is investigating deceptive sweepstakes practices. These companies target the elderly and make them think they will receive sums of money, but in reality senior citizens never see any of it.
The most popular of these scams is called “Social Security”.